Morsi's Ouster Leaves US with $1.5 Billion Aid Dilemma

Egypt’s military has $1.3 billion a year in U.S. aid riding on the Obama administration and lawmakers not calling the ouster of President Mohammed Morsi a coup.

Few in Washington were eager to use that label in light of a U.S. law that blocks directly financing “any assistance to the government of any country whose duly elected head of government is deposed by a military coup d’etat or decree,” or a coup “in which the military plays a decisive role.”

President Barack Obama said yesterday he has “directed the relevant departments and agencies to review the impact under U.S. law for our assistance to the government of Egypt.” Earlier in the day, administration officials refrained from describing the tumult that was under way in Cairo as a coup and underscored long-standing U.S. ties to the Egyptian military.

By the letter of the law, yesterday’s ouster of the democratically elected Morsi and suspension of the constitution could cost Egypt the military aid that it receives, as well as about $256 million a year in economic assistance. Obama requested a total of $1.55 billion in U.S. aid to Egypt in his fiscal 2014 budget.

Rather than condemning the day’s events as a coup, members of Congress underscored yesterday their distaste for Morsi in light of his roots in the Muslim Brotherhood and his refusal to share power once he was elected.

Morsi “was an obstacle to the constitutional democracy most Egyptians wanted,” House Foreign Affairs Committee Chairman Ed Royce, a California Republican, said in a statement. “I am hopeful that his departure will reopen the path to a better future for Egypt.”

Military Praised

House Majority Leader Eric Cantor, a Virginia Republican, said in a statement that “the Egyptian military has long been a key partner of the United States and a stabilizing force in the region, and is perhaps the only trusted national institution in Egypt today.”

An exception was Senator Patrick Leahy, chairman of the Senate Appropriations subcommittee that oversees the State Department and foreign operations.

While Leahy called Morsi’s time in office a “great disappointment,” he said, “Our law is clear: U.S. aid is cut off when a democratically elected government is deposed by military coup or decree.”

Leahy, a Vermont Democrat, focused on the future, pledging to “review future aid to the Egyptian government as we wait for a clearer picture.” Neither the House nor the Senate has acted on foreign aid funding for the next fiscal year, which begins Oct. 1.

‘It’s Premature’

Less than two hours before the Egyptian military announced Morsi’s ouster, State Department spokeswoman Jen Psaki declined to say whether overthrowing him would amount to a coup.

“With respect to the ongoing situation in Egypt, it’s premature to suggest that we have taken steps, we’re thinking about taking steps,” Psaki told reporters. “I’m not going to get ahead of, of course, events on the ground. But clearly, assessments would be made based on the facts on the ground and choices made by all parties, if needed.”

One U.S. official who’s been in contact with some Egyptian counterparts and asked not to be identified, said the army’s move wasn’t a military coup. Instead, the official said, it was an effort to block what some Egyptian officers -- and some Americans -- have feared was a slow-motion one by Islamists.

Defense Department spokesman George Little told reporters yesterday morning that the Pentagon “has had a very close relationship” with the Egyptian military and “we hope that after this crisis is over” that “we can continue to maintain the relationship.”

General Dynamics

A cornerstone of military assistance to Egypt is a deal in which some components for General Dynamics Corp.’s M1A1 battle tanks are built in the U.S. and then shipped to Egypt for manufacturing, according to a June 27 Congressional Research Service report.

Beyond U.S. aid, the International Monetary Fund and Egyptian authorities have been negotiating the terms of a possible $4.8 billion loan to Egypt.

An IMF spokeswoman, who asked not to be further identified, said in an e-mail on July 1 that the fund was following developments closely. The spokeswoman reiterated the IMF’s call for Egypt to develop and implement a homegrown program to resolve economic and financial challenges facing the country.